Cash and cryptocurrencies have been the target of the European Commission’s anti-money laundering efforts. Recently, the Commission published a roadmap of its proposal for the ‘restrictions on payments in cash’ initiative, extending them to cryptocurrencies like bitcoin.
The roadmap or ‘Inception Impact Assessment’ aims to inform stakeholders such as law enforcement, tax authorities, central banks and everyone who would be impacted by the initiative and give them the opportunity to provide feedback. It explains the initiative and explores options to restrict cash payments.
Citing cash transactions’ feature of anonymity, the roadmap states that “such anonymity can also be misused for money laundering and terrorist financing purposes”, adding that cash payment restrictions would potentially be a means to fight criminal activities using large cash transactions.
Some options considered by the Commission include forcing payments through channels that are not anonymous such as bank transfers and checks using EU legislation.
On the other hand, a competent authority could be made responsible for ensuring transparency. Alternatively, the declaration can also be made independently by all parties to the payments. The Commission also considered the level of restriction threshold and whether there should be a single threshold or variable thresholds based on country’s purchasing powers.
Extending the Restrictions to Cryptocurrencies
Among several approaches discussed in the roadmap is an option that takes into account new technologies such as cryptocurrencies.
The problem with cryptocurrency payments is different from that of cash. Cryptocurrencies are not regulated at the EU level. They are considered anonymous because their transactions are recorded but “there is no reporting mechanism equivalent to that found in the mainstream banking system to identify suspicious activity”, the Commission explained.
The roadmap suggests:
An option could be to extend the restrictions to cash payments to all payments ensuring anonymity (cryptocurrencies, payment in kinds, etc.). On the other hand, restrictions on cash payments could promote the development of alternative payments technologies compatible with the non-anonymity objective pursued.
If the cash restrictions were to be extended to cryptocurrencies, they will supplement the existing proposed measures to reduce cryptocurrency anonymity as outlined in the Anti-Money Laundering Directive (AMLD) amendments proposed last July.
More EU Controls on Cryptocurrencies
The Commission has been actively working on ways to reduce cryptocurrency anonymity since it published the ‘Action Plan for fighting against terrorist financing’ last February. The Plan builds on the EU’s Fourth AMLD, due to be implemented this year. It states that “there is a risk that virtual currency transfers may be used by terrorist organisations to conceal transfers”, prompting the Commission to extend “the scope of the AMLD to include virtual currency exchange platforms.”
In July last year, the Commission proposed defining “all gatekeepers that control access to virtual currencies, in particular, exchange platforms and wallet providers” as entities that must monitor suspicious transactions with cryptocurrencies.
Earlier this year, the Juncker administration confirmed that the fight against money laundering and terrorist financing, which includes cryptocurrencies, is its priority.
Images courtesy of Shutterstock and the European Commission